Walmart revenue grows as it works to absorb tariff hikes

Dive Brief:

While Walmart contends with rising costs related to tariffs, its second quarter revenue grew 4.8% year over year to $177.4 billion, the company announced Thursday. In the U.S., Walmart’s net sales also improved 4.8%, reaching $120.9 billion, while comps were up 4.6%. 
The company’s consolidated net income jumped 51.8% to about $7.2 billion while its gross profit rate increased four basis points to 24.5%. Meanwhile, operating income dropped 8.2% with growth impacted in part by a 560 basis point drop due to “higher self-insured general liability claims expense,” the company said.
Walmart raised its full-year net sales outlook to be between 3.75% and 4.75% growth. The company expects its adjusted operating income guidance to remain the same.

Dive Insight:

The impact of tariffs remained the topic of conversation during Walmart’s Q2 earnings call.

“With regard to our U.S. pricing decisions, given tariff-related cost pressures, we’re doing what we said we would do,” Walmart President and CEO Doug McMillon told analysts on a call Thursday. “We’re keeping our prices as low as we can for as long as we can. Our merchants have been creative and acted with urgency to avoid what would have been additional pressure for our customers and members.”

Though the impact of tariffs “has been gradual enough that any behavioral adjustments by the customer have been somewhat muted,” McMillon said the company has seen its costs increase each week as Walmart replenishes inventory at new tariff rates. McMillon expects this will continue into the next two quarters. 

Consumer behavior has remained generally consistent, McMillon added, but some shifts have been noticeable. With prices for some discretionary products rising, Walmart is seeing “a corresponding moderation in units at the item level as customers switch to other items, or in some cases, categories,” McMillon said.

Walmart’s e-commerce sales grew 25% globally and by 26% in the U.S., fueled in part by in-store-fulfilled delivery and its marketplace. The retailer also reported international net sales increased 5.5% for the quarter, reaching $31.2 billion. The growth was led by China, Walmex, and Flipkart.

“While tariffs introduce some near-term uncertainty, the focus on value and market share supports a favorable setup for sustained outperformance,” Jefferies analysts said in a note.

Walmart’s generally successful results amid macro headwinds demonstrate a unique pairing of strengths, according to Roth analysts. 

“Walmart’s automatization opportunities, data capabilities, and consumer proposition are a rare combination that supports market share gains AND increased profitability,” the analysts remarked in a note. “To that end, Walmart unequivocally committed to growing profits faster than sales.